Monday, March 25, 2019

Volumes are inflated 95%

March 24, 2019	View in browser

unbankd

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Today's top reads

Volumes are inflated 95%
$740 million pre-launch
Sun's fake following
Time is up Bitmain!

This week's poll: Do you, or have you ever, owned a CryptoKitty?
Click to answer: Yes No

Market update

COIN	PRICE	7-DAY
BTC	$3,959.38	- 0.27%
ETH	$134.73	- 2.15%
XRP	$0.304	- 3.40%
LTC	$59.14	- 0.86%
EOS	$3.61	- 3.43%

1. Volumes are inflated 95%

Bitcoin trading is much smaller than we thought. At least that's what a new story from Bitwise Asset Management is telling after the firm found that almost 95% of all reported Bitcoin trading activity is actually artificially created.

After analyzing 81 exchanges over four days in March, the firm concluded that the only trustworthy trading volume comes from 10 regulated, transparent, and efficient exchanges.

Out of those, the top 5, ranked by volume, are:

1. Binance	$110 million
2. Bitfinex	$38 million
3. Kraken	$31 million
4. Bitstamp	$31 million
5. Coinbase	$27 million

In the end, that means that out of the roughly $6 billion worth of Bitcoin exchanged daily, only $273 million is legitimate.

But there's a silver lining. While Bitwise's new research casts a dark shadow on the industry as a whole, it also brings clarity to the murky exchange environment.

So much clarity, in fact, that the researchers made the finding public in an attempt to convince the U.S. Securities and Exchange Commission to approve their latest exchange-traded fund (ETF) bid.

To calculate the ETF's trading price, Bitwise will only use the regulated 10 exchanges to find an equal-weighted average of the volume-weighted median price. Basically, the firm is only choosing to use the "good" slice of the pie as its ETF base rather than the entire industry.

In short: Bitwise is getting ahead of the SEC's concerns of fraud and manipulation by taking the fraudsters out of the equation first.

2. $740 million pre-launch

Bakkt made waves last week after The Block reported that the yet-to-launch crypto exchange has privately discussed a post-money valuation around $740 million after its Series A funding round.

With some quick math, The Block figures the valuation means parent company ICE sold up to 25% of shares to external investors including Galaxy, Pantera, and Microsoft among others. Notably, Starbucks also holds equity in Bakkt with no capital contribution after partnering with the upcoming exchange.

So...where's the return? At such a high valuation, and after a five-month delay, skeptics are now wondering how Bakkt is going to pull off the returns that a normal Series A round would bring venture capitalists. It also doesn't help that Bakkt is banking on charging a trading fee 8 times less than the next cheapest trading option - a move that thins margins significantly.

One source said:

"From a cash-flow perspective, Bakkt will not be earning much based on their proposed contract fees, so they really need a lot of volume. A lot of things will need to line up for investors to receive returns that they would typically expect for a Series A."

Don't worry, investors can get out. Even though Bakkt may have a thin chance of successful returns, ICE's SEC filing for the company shows that investors can redeem their equity in a repurchase clause.

In a nutshell: Bakkt has to crush it if investors are going to get out with the returns they would normally expect.

3. Sun's fake following

A new analysis by Geoff Golberg has revealed that close to half of Justin Sun's new followers are fake.

Recently, the TRON founder amassed 50,000 new followers to push him over the million mark, but analysis shows that close to 20,000 of the new accounts were created this month.

In addition, many of the new followers have common signs of spam-related accounts including:

Default profile pictures
Spammy display names
Few follower and following counts
Minimal tweets

Most of the suspicious Twitter accounts also seem to only retweet Sun's content - a sign of both automated and inflated activity. Whether Sun had a hand in adding the bots is unknown.

It's not uncommon in crypto. Sadly, fake Twitter bot armies are a problem within the crypto community. Whether the bots are created for pure social proof (to make projects look more popular than they really are) or to promote a giveaway scam, they are undoubtedly harming investors.

In August, researchers unveiled a sophisticated botnet that used a three-tiered structure that evolved over time to spread fake cryptocurrency giveaways and avoid detection.

The bottom line: Despite Twitter's efforts to crack down on bot accounts, they are still plaguing the industry.

4. Time is up Bitmain!

Bitmain's initial public offering (IPO) is about to lapse. Six months ago, Chinese mining giant Bitmain filed with the Hong Kong Stock Exchange (HKEx) to bring its mining manufacturing business public.

Now, six months later, the IPO filing has yet to hear a formal yes or no decision from the Listing Committee - meaning the listing is automatically obsolete.

Why it's a no-go: Previously, reports had claimed HKEx officials were skeptical of listing a crypto-related company because of the associated volatility and risk. Bitmain personally didn't help its case either.

In the last six months, the company has been scrutinized for:

Layoffs. Bitmain underwent a series of "business changes" at the end of 2018 that would cut non-essential areas of the business. That included chopping an Israel development arm as well as mainland China offices.
Hefty losses. Bitmain was slapped by the bear market after miners stopped buying new equipment. The result? An estimated $500 million loss on the books in the third quarter of 2018.
Lawsuits. During the six month time frame, Bitmain felt external pressure from two class action lawsuits that both claimed unlawful mining practices.
False investor claims. Bitmain's pitch deck to investors during its IPO attempt boasted notable investors like Tencent and SoftBank. SoftBank later denied any involvement and Tencent never formally confirmed the event. Either way, investors distanced themselves.

In the end: Bitmain has to go back to the drawing board and fix its own issues if it wants to go public any time soon.

5. You should also know

One investigative journalist at CoinDesk wrote a piece on decentralization from the Democratic Federation of Northern Syria.
A failed blockchain project called Sponsy is up for sale on eBay with a starting bid of $60,000.
R3's co-founder Jesse Edwards is now leaving the enterprise blockchain firm after working with the company for five years.

6. So y'all aren't maximalists

From last week's poll, 34.7% of respondents answered that they find themselves in the category of "Bitcoin maximalists." In other words, this group believes that Bitcoin should have or will have a monopoly over all other cryptocurrencies.

So far, in Bitcoin's 10 year span, no crypto has ever over taken the world's oldest cryptocurrency but that's not to say it can't happen.

Did you know? Since CoinMarketCap began tracking market dominance, the lowest Bitcoin's dominance has ever gotten was on June 12th, 2017 when Ethereum surged to claim 31.53% of the market - just 7% shy of overtaking Bitcoin and claiming "top dog status".

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